Bitcoin's Next Leap w/ CatVM
The Impact of the OP_CAT Upgrade
As the original cryptocurrency, Bitcoin paved the way for innovation and experimentation in its early days. Yet, as the narrative for being a store of value became more accepted, Bitcoin became rigid and resistant to change. Most builders and developers duly sought out more promising opportunities elsewhere.
Some want things to stay this way, but others have different ambitions. Among those not content with the status quo are Udi Wertheimer, Eric Wall, and 0xfar, the founders of the Taproot Wizards.
The Taproot Wizards aim to reignite the magic of Bitcoin. From their manifesto:
We yearn for fresh adventures to unknown lands.
We yearn for revelry and tomfoolery with our fellow Bitcoin wizards.
[...]
We will make Bitcoin magical again.
The project started as a collection of unique JPEGs of wizards inscribed on the Bitcoin blockchain using the Ordinals protocol. The collection is inspired by the Bitcoin "magic internet money" meme that emerged on Reddit in 2013, featuring a Microsoft Paint illustration of a wizard.
The team introduced Taproot Wizards with a 3.96 MB block, the largest in Bitcoin history at the time, containing Taproot Wizard #0001. The collection included a total of 2108 wizard ordinals.
With the funds raised from the sale, together with a $7.5 million seed round, the wizards aim to assemble a team of developers to launch new applications on Bitcoin, improve its scalability, and to cultivate an environment that encourages and nurtures cooperation among Bitcoin developers.
Following months of eager anticipation, the wizards unveiled their inaugural project on April 15th – the CatVM. The idea was presented in a whitepaper/cartoon that outlines a method for establishing trustless communication with off-chain Layer 2 solutions.
But before we look into the CatVM, let’s understand better first why Bitcoin hasn’t historically been the ideal platform to build complex applications on top of as say Ethereum or Solana.
Not quite the smartest kid on the block
Although Ethereum was the first chain where smart contracts were enabled, Bitcoin does offer something similar: the Bitcoin script.
Bitcoin Script is the programming language Bitcoin uses to do everything it can do. It is made up of words or opcodes. Opcodes are commands or instructions that tell the machine what operation to perform. For instance, the opcode OP_1ADD adds 1 to the input.
Today, what Bitcoin can do is fairly limited. Mostly just sending BTC from wallet A to wallet B, and locking and unlocking funds. The Bitcoin script has three main limitations that are responsible for this1:
It has a linear execution model
It lacks visibility inside transaction data
It cannot perform basic maths
Having a linear execution model means that all transactions are processed one after the other, with no loops. This prevents certain errors, like endless looping, that could halt or significantly slow down the network. However, it also greatly limits the complexity of what we can achieve. This is why Bitcoin is not Turing Complete2.
Bitcoin script also cannot look into the data of a transaction as it is happening, only the start and end state. This again limits the complexity of what we can build.
Lastly, Bitcoin script is bad at maths and simple arithmetic. Like, really bad.
Bitcoin script does not have the ability to multiply, divide or combine objects. This was not always the case though. The necessary opcodes to do all this (OP_MUL, OP_DIV, and OP_CAT) were all part of the original Bitcoin code. Satoshi disabled them in 2010 because their original implementations had vulnerabilities that could be exploited and endanger the network.
You may see where this is going.
Bringing back one of these opcodes that Satoshi disabled, OP_CAT, would enable us to overcome a lot of the issues that we just saw.
The CatVM
I am going to follow the CatVM whitepaper because it is great storytelling. I urge you to read it if you haven’t. It is fun, geeky, with great art and does a great job at explaining the technical concepts. Let’s start!
The hero of the story is Rijndael, a Bitcoin developer. Satoshi appears to him as a cloud in the sky, asking him to find a way for the Bitcoin citizens to be able to travel safely off-chain.
Rijndael travels far and wide, evaluating the previous attempts at creating off-chain solutions for Bitcoin. The writers of the whitepaper did not hold back much on their jabs at other projects here.
Rijndael first arrives at the Multisig Madlands, representing multisig bridges. Multisig bridges are completely built on trust and they are also notoriously unsafe - many of the top hacks were of bridges.
Rijndael then finds a Bridge to Nowhere that leads to the Lightning Wastelands. The Lightning Network is a solution to have cheap, off-chain transactions through channels between Bitcoin nodes. It is built out, safe, and reliably in operation since 2017.
It is a resounding success in all but one aspect: no one uses it.
Afterwards, Rijndael travels to the L2 village, backed by endless pots of VC gold. There, Rijndael finds the BitVM bridge, a complicated, half finished Rube Goldberg machine. The main issue with the BitVM is that pre-signed transactions are used. This means that only a predetermined address (called Prover) is able to withdraw funds from BitVM. Users have to trust this Prover, and the Prover must have enough funds at all times to front withdrawals from BitVM3.
After realising that all current solutions are a dead end, Rijndael arrives at the Merkle Tree forest, where he finds the Library of Spells. In there, he finds the book Cat & Schnorr Tricks: A Spellbook by Archmage Poelstra. It refers to this blog, by Andrew Poelstra.
In it, Poelstra explored the idea of using OP_CAT in conjunction with Schnorr signatures introduced in the Taproot upgrade. Together, they allow us to constraint the output of a transaction and validate the outputs of previous transactions. This technique allows us to “look” inside transactions.
Rijndael later proved that this can be accomplished with OP_CAT alone when building the Purrfect Vaults.
This all can let us simulate finite state machines and help us build a bridge off Bitcoin.
Rijndael then finds another manuscript, MATT - A Spell by Salvatore. This is the Merkleize All The Things proposal by Salvatore Ingala for encumbering a UTXO with arbitrary off-chain computation. It would be accomplished using OP_CAT and another opcode, OP_CHECKCONTRACTVERIFY.
This would allow for advanced functionality in a Layer 2 off-chain. The proposal also outlines a way to create an optimistic path. This is similar to how optimistic rollups participate.
Anyone with the data to produce either a withdrawal or a challenge can participate. This is in contrast to pre-signed transaction constructions where only a closed set of predefined participants can interact with the system.
All in all, we can solve -partially- the three issues that we saw before: transaction data visibility, better maths functionality, and its linear execution model.
I can hear you saying yes yes this is all very interesting, but is there a way for me to bet on this?
Well, yes there is.
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The Quantum Cats
Quantum Cats is a collection of 3333 Ordinals Inscriptions that change over time, revealing different artwork as they go. This is a first.
It is no wonder then that the launch wasn’t all smooth sailing. After some technical hiccups and having to push back the NFT drop date, the final sale kicked off on February 5th. With each Quantum Cat going for around 0.1 BTC, the team cleared 268.3 BTC or $11.3 million by the end of the day.
Since then, the collection has been trading sideways but with a bullish undertone. It even went on a run from 0.25 BTC to 0.52 between early April and its local peak just after the OP_CAT whitepaper was released.
The more attention OP_CAT gets, the higher the Quantum Cats likely go. And if the upgrade gets the green light, oh boy, buckle up!
But hey, even if it does not happen, there are looking NFTs to be stuck with.
At the end of the day, the Quantum Cats are not meant to be a betting market on wether OP_CAT is enabled again. They were created as a way of gathering support and raising awareness around the intended OP_CAT upgrade -and I guess raising a bunch of money in the process-.
And it seems to be working.
On April 22, the proposed OP_CAT upgrade for Bitcoin was assigned BIP-420. A BIP (Bitcoin Improvement Proposal) is a document detailing a proposal to inform the community and encourage discussion.
Having a BIP number does not ensure the proposal's adoption. Plenty of BIPs with numbers haven’t made the cut. But it’s still a nifty milestone for OP_CAT and a sign that more and more people in the Bitcoin community are curious about it and seriously considering it.
OP_CAT: Not Perfect, but Pretty Darn Good
The OP_CAT upgrade is not a perfect solution.
It does not enable smart contracts to the level that Ethereum or Solana have. Building complex applications on Bitcoin, even with OP_CAT, will be challenging and time-consuming, and the resulting solutions may not be as efficient as those on general-purpose blockchains.
If OP_CAT gets the green light, it's technically possible to create things like AMM DEXs and other fancy applications. But it's not going to be a walk in the park.
And of course, there's also some pushback against the upgrade.
Okay, maybe "some" is an understatement. But this is pretty much the norm whenever someone tries to change anything in Bitcoin (arguably a feature, not a bug).
Most of the naysayers want Bitcoin to stay the way it is, all rigid and unchanging. They worry that less ossification could weaken Bitcoin's store of value story. Plus, there are concerns about security and potential centralization.
There's also the risk of OP_CAT enabling miner extractable value (miner extractable value) MEV on Bitcoin. This would make the chain even more of a pain to use than it already is.
At the end of the day though, OP_CAT is something simple and well-understood that was part of Bitcoin from the start. We can bring it back without the downsides that made us turn it off in the first place. It might not be the most elegant tool in the shed, but it's got the best balance of power and simplicity.
For a deeper dive into the limitations of Bitcoin Script and an all-around great article on OP_CAT and the CatVM, check out this article by Kiara Bickers.
Turing Completeness is a concept that describes a machine or system capable of solving any computable problem, regardless of its complexity, provided it has sufficient time, memory, and the appropriate instructions.